Digital Services Supercycle: Generate Predictable Demand from Platforms
- Win the hearts and minds of digital developers
- Place artificial intelligence at the core of products
- Look out for emerging hardware paradigms
Just selling a product doesn’t cut it anymore. Every company is anxiously searching for innovative ways to hitch their future to where data fuels not only new, but predictable revenue streams on the back of connected things, artificial intelligence (AI) and other digital technologies. In fact, IDC predicts that by 2020, 50% of the G2000 will see the majority of their business dependent on their ability to create digitally enhanced products, services and experiences.
For example, Facebook’s deep-learning algorithms can personalize billions of news stories—including ranking, text translation and photo search—and provide updates in milliseconds to keep nearly two billion users per month engaged. Cisco, a network equipment powerhouse, is transforming into a software company, where services represent over a third of total revenue. Even luxury car maker Porsche is shifting value from horsepower to digital services, such as finding nearby parking spots or warning drivers of hazardous road conditions. Soon, software-based offerings will account for about 10% of the $89,400 sticker price of the new Porsche 911 sports car.
Pioneering companies are acting now to ensure they can achieve predictable demand for new sources of digital revenue—whether it’s software-as-a-service, machine-learning or container platforms. For incumbents, both the stakes and rewards are high. It is expected that by 2020, companies will have moved a significant portion of their R&D budgets to software that can be sold alongside products, according to a survey of the world’s largest R&D spenders. Those companies that have already made the shift report faster revenue growth than the competition.
Many companies have embarked on a digital transformation journey, but GE is a poster child for the old guard that have gone all-in, from sales and manufacturing to R&D. It wants to sell worry-free miles of flying. Another example of GE's bet on digital services and operations is its partnership with AT&T to deploy networked sensors in streetlights. The smart lights can dim or brighten, monitor air quality, keep an eye on parking spots and even detect and report gunshots.
GE and AT&T have developed smart streetlights that can dim or brighten, monitor air quality, keep an eye on parking spots, and even detect and report gunshots. To move digital transformation efforts further and faster, companies need to ensure their R&D organizations have the right incentives, culture and processes for growth.
The journey to attract the digital developer
Everything seems possible as developers are empowered with a diversity of technologies and platforms. Android Things and Android Auto let developers work on trusted platforms, without requiring previous knowledge of embedded systems. Neither tool existed a few years ago.
Similarly, augmented reality software development kits are ushering in opportunities for companies to differentiate immersive experiences that are waiting to be imagined. Machine learning—already a significant source of value creation—is available as APIs for developers to help recognize text, speech, images and faces.